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**Author: Steve Ivey** Edited by V Simon
So you want to be a Florida business owner, master of your own destiny?
Which came first – The Chicken or the Egg–
The age old question in the title might be worth thinking about. Should you do a start-up with an egg or should you buy some chickens? A silly analogy? Maybe not.
Many people dream of starting a venture and becoming a business owner in Florida. I’ve helped several hundred wannabe-entrepreneurs work through this process. Many come in with the egg in hand, delicate, carefully guarded and full of promise. Perhaps they’ve decorated the egg to make it look more attractive and more advanced than other eggs. Convinced that their egg is unique yet they really aren’t quite sure what it will be when it hatches. They rarely consider that it may not hatch at all. After a time of incubation where you’ve kept it warm and looked at it all hours of the night maybe even added a few more colors to it, it hatches.
You have a chick! They are furry, loud and ready to be fed. It was a chicken after all and you are very proud of this new creature, you probably give it a name even though you can’t tell whether it’s male or female (which is very difficult in young chicks). A few days later you realize that you’ll need another egg or have to buy another chicken to mate with yours or your precious egg, after lots of feed and care, will have provided you with 1-chicken dinner and be gone. Your great idea didn’t produce much and you really were never in business.
Of course, you are smarter than that so you had several eggs or a partner who also had an egg that was compatible with your egg, Hmm, more about that another time. The point or question is: did you save time or resources by starting with the egg versus buying some chickens? Both actions will get you to the same place of beocming a business owner in Florida. You thought the egg route would be simpler and cheaper, let’s explore that.
Business ownership: A Going Concern or Start from Scratch
Previously we were discussing, not whether to go into business, but the decision of which method made sense for you. A chicken or egg scenario, do you start from scratch with just an egg? An idea that has yet to hatch but holds great promise or do you purchase some chickens, a going concern that is producing revenue and , hopefully, income.
Under the egg method you must have time: Time to weather the delays of a startup, the lack of customers, employees, revenues and spendable income. In fact the reality is you will most likely go deeper in the debt hole having no personal income for many months if not years. Do you have that kind of staying power (reserves)? Investors, if you can find any, will not allow you to spend their money on your living cost. So for sake of analysis let’s examine which is better, the chicken or the egg.
Your egg has a cost obviously much less than buying a group of chickens, but it does not produce current income. Let’s say you have spent $50k on your egg (idea) so far. Even when it hatches you’ll have to build up your “coup” of chickens letting other eggs hatch not taking income while this process build. You now have another $200k sunk into your business and / or debt from living expenses.
At $250k you could have bought a chicken farm, a revenue producing enterprise. You’d have debt but also income. You’d be buying a proven business because you did your due diligence, and know the stream of revenue the business has been producing. You might have to spend a few dollars for sprucing up the business; perhaps a new marketing campaign but you have INCOME!
But my egg is a fantastic idea. Could be? I hope so. BUT 75% of all new businesses fail by or before year 3 and 85% by year 5, Risky? You bet! Still want to be in business? Good. We’ll discuss alternative ways to make that happen while lowering the risk next.
Choosing Franchise Ownership over Starting from Scratch
So if I scared you by telling you before that about the 85% failure rate, you are now being realistic about your chances. I also promised a way to get into being a Florida business owner that is less risky, ready?
I’m writing this to both newbies and serial entrepreneurs; consider a proven concept with a well-established franchise. Of course you already know all about that and have been receiving vast amounts of promotional material from various Franchise development departments. They want you to buy a NEW location. While their concept might be proven, locations seldom are. However, good Franchisors have good methods for picking locations. So what do I have to say that’s different?
I suggest you seek out existing franchises that are either underperforming or the owner (franchisee) just needs or wants to get out. Franchisors know about these folks but will not suggest this upfront as their fees are much less when a transfer is made. In fact at any one time at least 20% of a Franchise portfolio is in transition or the Franchisor is looking to move out a poorly performing location because the owner is just a bad manager or lazy thinking he or she didn’t have to work at the business. This can be the “chicken” way of getting into business as there are good records and you’ll know what you are getting into. Plus, it will have revenues day one! You will most likely get into this existing location around 30% less than if you had started it. Now that’s a better deal. We like to be creative in finding deals for folks.
For you serial business folks with deeper pockets, there are often groups of locations available for many of the same reasons above. You can buy the whole package or pick and choose for a slightly higher price. Either way you get a viable, ongoing group of locations priced based on their current performance not the excellent performance you will get out of them once you apply your smart management talents.
Are you considering selling your business? We can help you. Contact us here
Confidentiality when selling your business
The best way to relate to a situation is imagining you are there. If I were in a job, everything is going well, and then, rumor has it the company is on sale. The first thing it would come to my mind would be, what’s going to happen to my job? Should I start looking for a new one?
When selling a business the best is to do it discreetly for many reasons:
News that your business is for sale can generate negative reactions among your employees, customers, suppliers, creditors and bankers.
As an employee, I believe this would lower the morale and make others nervous affecting productivity and customer service. Your competitors can get predatory and spread the word. It opens the door for them to steal business from you.
You, as a business owner, want to protect your business at all costs. Whatever is the reason for you selling your business, it is imperative to be discreet. Hiring a business broker can be beneficial when it comes to selling your business while keeping a low profile. They can list your business for sale while at the same time protecting the identity of your company.
A business broker uses a document called a Blind Profile, a document describing the company without revealing its identity. In the case of a buyer showing up, he must sign a confidentiality agreement to have access to any sensitive information, protecting you and your business.
You as a business owner should focus on running your business even if it’s on sale. A business broker is an intermediator who will help you to run the process smoothly from beginning to end.
NewGate Capital Partners can help you sell your business. Contact us anytime at http://www.newgatecapitalpartners.com/business-brokerage/
Million dollar myth: Sydney Angels co-founder Hamish Hawthorn says as little as $15,000 can get you access to an angel investment opportunity, and it’s not only grey-haired men that participate.
“MYTH: ANGEL INVESTMENT DOESN’T DELIVER RETURNS
Angel business investments are certainly a high-risk area. Half of all startups, even after good screening, due diligence and post-business investments help, will fail to return what was invested. But these losses can be more than compensated by the few that return 10-30x the initial investment. The key to making returns is to have a portfolio of enough investments to contain some of these big winners. Those who use a disciplined investment process to build portfolio can see extraordinary returns from the startup sector over time.
A large-scale study undertaken by the Kauffman Foundation and NESTA found that angel investors in the US and UK generated an average return of 2.5 times the amount invested in a mean time of four years from investment to exit, equating to a very healthy 26% internal rate of return. “
Excerpt taken from article: “We’re not all retired blokes, and 4 other angel investor myths busted” by Sydney Angels co-founder Hamish Hawthorn http://www.brw.com.au/p/entrepreneurs/hamish_busted_sydney_angels_retired_O6yEoclYtKcIHAJ0S1n56H
QUESTION: Which one of the reasons below does the Entrepreneur have the least amount of control over? Interesting…
- Timing 42%
- Team/Execution 32%
- Idea “Truth” Outlier 28%
- Business Model 24%
- Funding 14%
From: “Ted talk on the single biggest reason why start-ups succeed:”
Be careful how you (we) interpret things because you (we) are looking at the world with a bias.
Check out this video “The Backwards Brain Bicycle” a simple experiment of how the brain works.
Lesson for Coachable Entrepreneurs: Knowledge doesn’t equal understanding
Video Source: SmarterEveryday
Mentors Are The Secret Weapons Of Successful Startups
Excerpt from Rhett Morris article:
..“I’ve probably revised this investor pitch deck 200 times,” a founder told me recently. She’d met with more than 50 potential investors before closing a seed round last month. This might sound excessive to some, but her experience is not unusual.
Entrepreneurs often spend hundreds of hours raising funds from angel and venture capital investors. While these activities are clearly important, analysis of new data on startups suggests that founders should also dedicate significant time to something that many people overlook: recruiting great mentors. This simple strategy can increase a company’s odds of success more than almost anything else..
Women – next wave of Angel Investors
Except from the article by Alicia Robb:
“Females have historically made up less than 15% of the angel investors in the United States. The University of New Hampshire’s Center for Venture Research estimated that women angels represented 19.4% of the angel market in 2014, which was a significant increase from the 12.2% number from just two years prior. Women-owned ventures accounted for 23% of the entrepreneurs that were seeking angel capital and 19% of those entrepreneurs that received angel investment in 2013.”
Women – next wave of Angel Investors, Entrepreneur Magazine
1) On a macro level, the biggest impact for getting more women on the investing side is to create more women entrepreneurs. Entrepreneurs are more likely to invest in other entrepreneurs, and the risk profiles of entrepreneurs match well to investing
2) Highlight women investors more often. Every time she sees an opportunity to talk about angel investing, she makes sure women are speaking, which also brings more women.
3) Any efforts to educate people outside of the startup community about angel investing would attract both men and women, and this would bring in investors who aren’t entrepreneurs.
Entrepreneurship is not for everyone and certainly not for the weak hearted. If you do not want to rent yourself to the corporate world but create something from scratch, then entrepreneurship is for you.
Being an entrepreneur means patience, sacrifices, and the willingness to work for as little as nothing until success is reached. The Entrepreneur Rollercoaster provided by David Hauser from getontherollercoaster.com is a quick illustration of the amazing and challenging journey every entrepreneur faces. Can you handle it?
Click here for more information on our Entrepreneurs.